What discount rate should I enter?

Your company's hurdle rate or cost of capital, which finance can give you. A weighted average cost of capital is common; a higher rate adjusts for riskier projects. Enter 0 to see every row undiscounted.

Why does residual value not shorten the payback?

Because payback counts only the yearly savings, and resale money arrives once, at the end of the service life. It counts in NPV and the undiscounted net, where a high resale value can rescue a slow payback.

What if discounted payback is longer than the machine's life?

Then the savings alone do not earn your cost of capital before the machine is retired. Only resale value can lift NPV above zero, so check that figure against real used equipment prices.

What belongs in installed equipment cost?

Everything spent before the first good part: purchase price, freight, rigging, foundations, utility hookups, tooling, programming, training and commissioning. Leaving installation out shortens the payback only on paper.

Costing calculator

Equipment Payback Calculator

Screen a machine purchase before it reaches finance: years to repay its cost, with and without discounting, against its service life. You need installed cost, yearly savings and maintenance, resale value, life and your discount rate.

What this calculator does

Simple and discounted payback on a machine purchase, net present value at your rate, and whether it pays back inside its service life.

Formula used

Net annual benefit = annual savings − annual maintenance; simple payback = installed cost ÷ net annual benefit
Discounted payback = LOG(net ÷ (net − rate × cost)) ÷ LOG(1 + rate); none when net ≤ rate × cost
NPV = net × (1 − (1 + rate)^−life) ÷ rate + residual × (1 + rate)^−life − installed cost
At a 0% rate: discounted payback = simple payback and NPV = undiscounted net
Undiscounted net over service life = net × life + residual − installed cost

Inputs explained

Installed Equipment Cost: Purchase price plus freight, rigging, installation, tooling and commissioning.
Annual Savings: Gross yearly savings: labor, scrap, energy or added contribution margin.
Annual Maintenance: Service contracts, spares and PM hours the machine adds each year.
Residual Value: Resale or salvage value you expect at the end of service life.
Service Life: Years the machine will run this work before resale or replacement.
Discount Rate: Your cost of capital or hurdle rate from finance; 0 skips discounting.

How to use the result

Best suited to screening a capital equipment request, choosing between a new and a used machine.
Ignores tax, depreciation, inflation and overhauls; both paybacks also ignore all cash after the payback date.

Current U.S. benchmarks

As of 2026-10-02, the U.S. prime lending rate is 7.00% (Federal Reserve via FRED). Equipment loans and lines of credit typically price at prime plus a spread, so use your actual borrowing rate when you have it.
U.S. manufacturing runs at 75.7% of capacity (Federal Reserve, Aug 2026). New factory orders are up 8.5% year over year (Census).

Common questions

What discount rate should I enter? Your company's hurdle rate or cost of capital, which finance can give you. A weighted average cost of capital is common; a higher rate adjusts for riskier projects. Enter 0 to see every row undiscounted.
Why does residual value not shorten the payback? Because payback counts only the yearly savings, and resale money arrives once, at the end of the service life. It counts in NPV and the undiscounted net, where a high resale value can rescue a slow payback.
What if discounted payback is longer than the machine's life? Then the savings alone do not earn your cost of capital before the machine is retired. Only resale value can lift NPV above zero, so check that figure against real used equipment prices.
What belongs in installed equipment cost? Everything spent before the first good part: purchase price, freight, rigging, foundations, utility hookups, tooling, programming, training and commissioning. Leaving installation out shortens the payback only on paper.

Related guides

Last reviewed 2026-10-05.